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Stamp duty costs up to 6x higher than a generation ago: Victorians hit hardest - featured image
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Stamp duty costs up to 6x higher than a generation ago: Victorians hit hardest

Property buyers in Victoria are paying 6.1 times more for stamp duty than just one generation ago.

In Victoria, wages have increased a bit over five times and the median house price has increased just over 12-fold times in that time.

According to new PropTrack e61 Institute research, a full-time worker earning an average of $85,000 yearly wage now needs to spend the equivalent of six months’ income on stamp duty when buying a dwelling for Melbourne’s typical $790,000 value.

Stamp duty on a median-priced home in Victoria costs around $42,500.

In Sydney, homebuyers would have to fork out $44,500 or 6 months of full-time post-tax income for stamp duty, up 5.4 times compared to the 1980s.

While Brisbane homebuyers face a lower stamp duty burden, it is still 5.5 times higher than 4 decades ago.

Brisbane owner-occupiers buying a median-price home were facing stamp duty costs of about $18,700 or 2.7 months of income, while investors could expect to pay $25,900.

Stamp duty costs have also jumped 4.4 times higher in Adelaide; 4.5 times higher in Perth; and 6 times higher in Hobart.

Stamp Duty Compared To Monthly Earnings

Source: e61 Institute, Proptrack

The data reveals that as a result of the increases, the proportion of Melbourne home buyers paying Victoria’s highest rates of stamp duty has risen to 33%, up from 6% since the introduction of the current stamp duty schedule in 2008.

Proportion Of Home Sales Paying Top Stamp Duty Rate

Source of image: AFR

South Australia is the next biggest beneficiary of stamp duty as a percentage of sale price on a median-priced home in Adelaide which doubled to 4.6% during the same period.

Stamp duty on Sydney’s median-priced homes increased at a slightly slower rate of 2% up to 4% over the period thanks to stamp duty brackets introduced in 2019.

Stamp duty acts as a barrier to buyers

The research shows how the stamp duty tax has become a blocker preventing or stalling buyers from making purchases.

Research manager at the e61 Institute, Dr Nick Garvin, said the research highlights the indirect impacts of stamp duty on other parts of people’s lives including whether or not they change jobs, and when they decide to have children.

“Previous e61 research highlighted that preventing job switching can weaken productivity which has flow-on effects on wage growth and inflation

Overhauling the current stamp duty system has the potential to alleviate these pressures on individuals and the economy more broadly.

Housing affordability and availability is without a doubt a challenge of our time.

Governments and policymakers must consider the unpopularity of stamp duty, and the indirect impacts stamp duty has on various other parts of the economy and people’s lives."

PropTrack senior economist Angus Moore also calls stamp duty an inefficient tax.

“It discourages people from moving to homes that suit them.

"While the rise has largely been incidental, rather than an intentional increase in tax rates, stamp duty reform is critically needed to allow the property market to operate more efficiently."

Call to act on stamp duty reform

Rising home prices and declining housing affordability have raised calls for governments to replace hefty stamp duty costs with smaller and more incremental land taxes.

Real Estate Institute of Australia (REIA) president Leanne Pilkington said Australia’s stamp duty is outdated and also increasingly unaffordable as interest rates and the cost of lending increase.

"Not only is it outpacing the rate of savings, but it also stops Australians from pursuing new housing options and job opportunities so it is an inhibitor to mobility,” she said.

"Stamp duty was a broken promise with the introduction of the GST and state governments continue to be happy to collect nearly $60 billion in stamp duty receipts on housing annually whilst at the same time griping about housing affordability and failing to build enough houses."

Stamp Duty

The problem is state governments are too reliant on stamp duty

Unfortunately, state governments are unlikely to overhaul stamp duty tax reform because they are so heavily reliant on it as a form of income in order to meet budget requirements, e61’s Dr Garvin explains.

For example, in the 2021-22 financial year, stamp duty accounted for 29% of Victoria’s total revenue, ABS data shows.

In NSW, stamp duty accounted for 30% of total revenue over the same period.

I can’t see them giving up that type of revenue – can you?

But some state governments are beginning to make changes

The ACT has been leading the way on stamp duty reform, having embarked on a 20-year plan to phase out the tax back in 2012.

It has been slowly phasing out stamp duty while raising council rates and land tax, as part of a two-decade process to make it as equitable as possible for residents.

Meanwhile, Victoria made some advances on stamp duty reform last year when its state government announced plans to replace stamp duty with a property tax on commercial and industrial property transactions, but this doesn’t include residential stamp duty.

In NSW last year, the Minns state government scrapped the previous government's stamp duty reforms, which gave first-home buyers the option to pay stamp duty or an ongoing annual land tax, and replaced it with changes to stamp duty thresholds and introduced concessions up to a $1 million purchase price.

Stamp Duty Waivers have been applied across most states and territories to reduce or eliminate stamp duty on properties up to a certain threshold, but these differ for each state.

A final note…

While there are several costs associated with buying property – it’s much more than just the property sale price alone, by understanding what these are and budgeting for them from the outset, every homebuyer and investor can sit back and watch their asset grow in value over time.

The most important place to start is by doing your research and ensuring that you are budgeting with all the costs in mind to ensure you don’t fall into the trap of falling short of funds for your stamp duty bill.

I wouldn’t hold my breath waiting for any stamp duty changes, instead, I’d take advantage of the current window of opportunity to get into the property market before it resets later this year when interest rates eventually start to fall.

About Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.
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